Sick projects put government’s billions at risk

  • 1,848 projects with contract amount of Rs118 billion are incomplete

Feb 21, 2019-

On June 15, 2009, Amrit Nirman Sewa, a construction company, won the contract to build a labour room for Golbazaar Health Post in Siraha.

The project was supposed to be completed in a year. But even after nine years, only five percent of the work has been accomplished while the deadline of the contract has not been extended for the last seven years.

When the contract of Khana-Jalkanda-Gufa Road was awarded to KP Construction Arghakhanchi at Rs658,000 on February 4, 2015, the latter had agreed to complete the project in three months. As of December last year, only 30 percent of the road had been completed.

The labour room of Golbazaar Health Post and the Khana-Jalkanda-Gufa Road  are among the 1,848 projects that are to be completed, even though their deadlines expired in December 2018, according to a report of the Commission for Investigation of Abuse of Authority.

The report was prepared after studying the projects under seven ministries.

The report states that  a total of 1,848 projects with the contract value of Rs118 billion are incomplete and past their deadlines.

Moreover, the deadlines of 1,032 projects have not been extended.

The highest number of sick projects are related to the Ministry of Physical Infrastructure and Transport (906), followed by Ministry of Urban Development (442), and Ministry of Energy, Water Resources and Irrigation (326), according to the report.

In terms of contract amount, the Ministry of Energy, Water Resources and Irrigation is on top with Rs57.09 billion, followed by the Ministry of Physical Infrastructure and Transport (Rs20.76 billion), and the Ministry of Communications and Information Technology (Rs15.46 billion).

The anti-graft body had also studied the projects under the Ministry of Urban Development, the Ministry of Federal Affairs and General Administration, the Ministry of Culture, Tourism and Civil Aviation, and the Ministry of Water Supply.

More than Rs 23 billion at stake The troubling fact, according to the report, is that the government faces the risk of losing around Rs23 billion advance payment offered to the contractors, owing to the expiry of Advance Payment Guarantee (APG) issued by the bank on behalf of the contractors.

According to officials, there are several projects where the government agencies have failed to transfer the APG amount to the government agencies’ account.

“Our office usually ask the banks to transfer the amount equivalent to the APG to our office account. If they fail

to do so, there remains the possibility of losing advance payment,” said Arjun Suwal, chief of planning and monitoring unit at the Department of Roads.

On December 20, 2018, the department had sought clarification from the divisional engineer and account chief of the Morang Road Division for failing to seize the APG and performance guarantee of a number of road projects.

“We asked them why they should not face action for causing harm to the government by their inaction,” said an official at the department.

The anti-graft watchdog’s report also states that another Rs6 billion related to the performance guarantee is also at risk due to contract deadline expiration.

Officials point finger at contractors

The government agencies blame the contractors for the delayed projects. Some projects have stalled due to contractors abandoning the work after taking the advance payment.

The CIAA report has questioned why the government agencies did not treat such incidents as contract violation.

If a contractor has not worked for 30 days continuously as per the work plan approved by the project manager, that is construed as fundamental breach of contract.

“The  concerned government agencies should  look into such lapses, but they were not found to have done so,” the report says.

Awarding contract without adequate preparation, extension of contract without valid reason, non-implementation of conditions directly related to the project, and the general lack of coordination among the concerned government agencies are among the problems highlighted by the report to explain why hundreds of projects are incomplete.

The report has also given the case of the 14MW Kulekhani III Hydropower Project whose contract was extended for eight times.

The four-year contract, according to the report, underwent one extension after another for 11 years after it was first awarded on April 4, 2008.  

Another case the report has pointed out is of the Nepal Electricity Authority. The state-owned power utility was found to have extended the deadline of a project by five years, even though it was supposed to be completed in two and a half years. The project is still incomplete after more than seven years.

The CIAA has suggested making the government agencies accountable for the incomplete projects that have run out of deadline.

It has also recommended setting down the conditions whereby contracts are awarded to only after vetting the contractors in terms of their financial capacity and human and technical resources.   

Besides, the anti-graft body has also recommended enforcing a solid standard for deadline extension and

variation order as well.

The CIAA has sent the copies of its report to the concerned government agencies.

It had also recently discussed the findings of the report with the officials of the concerned government agencies.

“We have suggested the government officials to prepare an action plan to address the issues raised by the report, as well as tackle the issue of each sick project separately,” said Rameshwor Dangal, spokesperson at the CIAA.

In line with the CIAA’s recommendation, the Department of Roads has formed a committee to look into problematic road and bridge projects.

“We are gathering details on the status of the road and bridge projects from across the country. After studying them, we will take necessary steps to resolve the issues faced by those projects,” said Rajendra Raj Sharma, who leads the committee.

Published: 21-02-2019 10:17

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